Limited Mileage on HP?

[jims-terrano]

Can someone clarify this please.

My eldest son has recently bought a 4 year old Golf from Arnold Clark, seems like a reasonably large chain of garages.
Anyway he has just come in and mentioned in passing he’s nearly back on track for mileage, I had to question this.
Apparently the HP contract limits his mileage?

Is this right? I thought if you buy a car although until you have paid it off you don’t actually own it but apparently the salesman told him it still belongs to Arnold Clark until paid off and they have the right to charge more if he goes over a certain mileage limit. Now I can understand this arrangement with one of these lease schemes but when you are actually buying it seems wrong to me.

[solarman216]

Sounds like a scam to me, but these days it seems scams become legal, Rick

[RJL Services]

lease cars have mileage restrictions but if you are buying the car you should be able to do what mileage you like after all it is your car sounds like scam crap from them check your agreement or contact finance company my wives has none of this and hers is on hp

[solarman216]

my wives

How many you got, Rick

[weedave]

Jim,

i have had the same thing with ford/mazda in NI, they had limited the mazda 6 mileage to 13,000 per year, 3 year repayment terms, when i questioned the reasoning behind mileage limits they told me until i paid the HP in full that they technically still own it. Apparently the nature of HP means there is risk to them that the buyer falls short on repayments and if they have to repossess the car then at least they are getting one back that hasn't been used more that average, there view being its easier to on sell a avg mileage repo.

Maybe have a look at the small print on the HP contract, if there is a big concern at your end maybe have a solicitor look at it.

cheers

[weedave]

Ask them this - when i have paid off 51% then i have majority share so at that point i can do what mileage i like???
when i didn't get the answer i wanted needles to say i went elsewhere.

[jims-terrano]

He is supposed to be looking at the agreement today.

I hate car dealers, I know they’re a business for profit and not a charity but sometimes I feel like many other organisations they hide behind small print. I’m cynical old sod aren’t I.

[Davey Boy]

How many you got, Rick

:lol

[Davey Boy]

Vehicle ownership takes your money one way or another.
New, secondhand, HP, lease....

My wives have a RAV4.

Exceeded the stated mileage.
Expecting a tag on bill at the end.
Car showrooms are just interested in the finance package they can tie you into.
It just happens to be cars that are their means towards that.
Windows, conservatories, new houses and hot tubs. All have the same finance model.
They sound like they're interested in your choice and can offer a bit of technical advice and show you a colour chart, but honestly it's all about the 3year or 5year deal. Their training is bias towards that.
IMHO

[macabethiel]

The mileage restriction has been as a result of low interest rates on HP loans over the years. As a consequence as vehicle residual values have carried on still being quite low when someone defaults the Finance Companies take quite a hit when they repossess a vehicle. The vehicle will have lost the initial dealer mark up plus the annual depreciation. Defaulters also often do not look after the vehicle or damage it when repossessed.

Large Dealerships then started to enter into something called full or partial recourse. This means when they retail a used vehicle on HP they have to agree a guaranteed buy back price as a percentage of the initial sale price if the vehicle is handed back or repossessed.. This prevents dealers from inflating a used car price to cover the deposit by similarly inflating the price of any trade in. The result has been a benefit for the buyer as they have been offered loans on HP that are sometimes better than a Credit Sale Agreement where the vehicle is never the property of the Finance Company.

Over time as many big Dealerships have shied away from entering into Full or Partial Recourse arrangements then to cover themselves mileage restrictions have been added to the equation. As with Lease deals you can specify higher annual mileage but it gets expensive as the interest rate is higher. Often they do not offer the product at all for high mileage use.

In the past a straight Bank Loan has usually been the cheapest way to borrow money and sometimes still is. This Market Place has changed as Dealers have engaged into single finance company arrangements within a group. When I was in Car Sales we had two finance companies that we worked with. One was GMAC part of General Motors we used them for new vehicles and used vehicles up to 4 years old. For older vehicles we used a Finance Group in the secondary banking sector (before it spectacularly collapsed in the 1970's) called Julian Hodge Finance.

Back in the 1970's they typically charged 15 % p.a. interest rates so if a loan went bad after say 12 months as most Dealers were not on recourse the finance company would have had a years interest to offset the loss when selling the vehicle.

To make things worse the move into Personal Lease Plans (PLP's) has further eroded the value of used vehicles as the difference in cost between a New car & a Used car has become so small that buyers are shunning used vehicles. This has led to a glut of used vehicles in the 2 to 3 years old sector whose residual value is above the retail price!

If I was in my 30's I would run a new car on a good PLP deal and change it every three years. Now as I am in my 70's I buy an older used car for cash and allow a monthly cost for maintenance if needed. This has worked quite well for us in over the last 15 years as mostly we have bought for under £5k and had 5 years use out of each of our vehicles. I doubt I will live long enough to see the day when 50% of vehicles are pure electric.

Clearly there is going to be a shift away from Diesels and big engines towards small petrol & hybrids as manufacturers scrabble to come up with affordable all electric vehicles.

Knowing what a lie Car Manufacturers still publish for Fuel Economy makes me very sceptical about the range of all electric cars in real world driving such as on dark winter nights. A friend of ours has bought a used Nissan Leaf I await how it manages this winter!

[Davey Boy]

Mac, ‘
This piece is of epic proportions.
I’m going to have to take time out to inwardly digest the content of your post.
You are a wordsmith Sir!
Thanks

Davey

[Lazy-Ferret]

Mac, ‘
This piece is of epic proportions.
I’m going to have to take time out to inwardly digest the content of your post.
You are a wordsmith Sir!
Thanks

DaveyTotally agree... thanks for that well written response Macbethiel

Sent from my SM-G930F using Tapatalk

[macabethiel]

Mac, ‘
This piece is of epic proportions.
I’m going to have to take time out to inwardly digest the content of your post.
You are a wordsmith Sir!
Thanks

Davey

Thanks for your comments much appreciated.

As an addendum Vehicle Manufacturers such as Mercedes are actually subsidising new car finance to attract buyers from other makes. They will offer very attractive deals on selected new models to get the product into the market place then with clever advertising and brand value they slowly withdraw the offers as the demand increases.

The way Mercedes have increased the sale of Smart Cars is a case in point. They regularly offer very good deals on lease plans to get the product out there despite it not being very good value for money in the small vehicle market place.

Back in the 1970/80's most car dealership profits came from the sale of new & used vehicles with a substantial extra margin on finance commission - now illegal I believe but still done under other guises I suspect. Most Service Departments ran at close to break even or as a small loss subsidised by the sales department.

Now in 2018 Main Dealer Workshops now actually support / subsidise the Sales side of the business. The MB dealership I worked at would regularly make a monthly profit before tax of around £800,000- just from the workshops. Our best single customer was MB Warranty Department.

The crazy rise in workshop hourly rates has led to most large towns now having specialist service centers for the likes of BMW, Volvo & MB. The lower end of the market for Ford & Vauxhall etc have been catered for by the likes of Halfords Service Centers & small independents.

Back in the mid 2000's everyone at the big dealerships thought that they could squeeze out the independents by invalidating warranties if serviced outside dealer networks and making diagnostic equipment exclusive & patent protected but an EEC directive that I can't remember the name of stopped it.
https://www.theaa.com/driving-advice/service-repair/right-to-repair-campaign

[solarman216]

A worthy piece I have to say, I also have to say I was instrumental in helping Mac to stay after he sold his Nissan, and am really glad I did, Rick

[macabethiel]

A worthy piece I have to say, I also have to say I was instrumental in helping Mac to stay after he sold his Nissan, and am really glad I did, Rick

All true Rick although my own posts have reduced I still enjoy our community long may it continue.

[solarman216]

You are too good to loose, Rick

[don simon]

Wonderful posts up there. :thumb2
The problem with HP is that ownership doesn't pass to the purchases until the final payment has been made, so when looking at the business models as mac posted, the owner (seller) will do whatever they can to protect their asset.
Unfotunately he's got to stick to their terms, unless the terms could be considered unreasonable and were hidden away.

[jims-terrano]

Absolutely if he’s signed an agreement hard lines. It’s years since I last had HP on a vehicle but if they tried it on with me I’d walk away, call me old fashioned but I won’t give up freedom lightly. Too much freedom has been eroded over the years.
Looks like I’d better keep my trucks on the road so I don’t have to buy another vehicle:doh

[macabethiel]

Absolutely if he’s signed an agreement hard lines. It’s years since I last had HP on a vehicle but if they tried it on with me I’d walk away, call me old fashioned but I won’t give up freedom lightly. Too much freedom has been eroded over the years.
Looks like I’d better keep my trucks on the road so I don’t have to buy another vehicle:doh

True we are assuming he is past the 14 day cooling off period where he can cancell the agreement without penalty.

[jims-terrano]

Yes well past the cooling off.

To be honest it concerns me now as my youngest son that paid out for huge engine repairs late last year managed to write his car off on Sunday evening so he’s going out looking for a new car at the weekend. It’ll be something I’ll take note of to see what garages are doing.

[don simon]

As mentioned, get a bank loan and the car will be owned outright from day 1, assuming there's no other outstanding HP on it.
Another bit of law for you being that if you innocently buy something that belongs to someone else, they can take possession of it and you lose your money and asset. Worth looking at an HP checker on the next car.